This thesis is to apply the option pricing model of Black-Scholes (1973) and the real option-pricing model presented by Laura Quigg (1993) to value the 30 residential land sites sold by the Hong Kong Government through public land auctions during the period from 1994 to 1996 so as to understand whether the transaction prices of the land sites reflect the fair land value calculated from the model. The result revealed that Hong Kong property developers are in most cases likely to purchase urban land sites (i.e. Hong Kong and Kowloon) at a price close to or higher than the estimated land value irrespective of the property market condition. But for rural land sites in New Territories, the property developer would normally become more conservative and usually purchase the land at a discount rate even when there is an improving property market condition. The only difference is that during the good market condition, the property developers are likely to offer a lower discount rate than that of a depressing period. This inconsistent result is mainly because supplies of vacant urban land for property development as contrast to the rural land are decreasing. Thus, apart from the property market condition, the quality and location of the land sites would also be the crucial factors for the property developers' decision during the time of land acquisition. Besides, expected result could also be concluded from this study. It is found that the real option model price always exceeds the intrinsic value and in some cases by a substantial margin. The option premium between the option model value and the intrinsic value ranged from 2% to 36%, which were similar to Laura Quigg's result of 1% to 30%. The results show that when the market situation was improving, the property developers might be benefited more if they could develop the land sites acquired more quickly than those purchased during the period of a depressed property market condition. Finally, paired samples T test for the variables of accommodation value of land (AV), option value (c), real option model value (RP) and intrinsic value (IV) were computed. It has been found that the mean of differences for RP - IV (969.667) appears to be consistent with the Hypothesis 2 (i.e. RP&gt; IV). But for AC - c (-232.500), it seems to be inconsistent with the assumption made on Hypothesis 1 (i.e. AV &gt;= c) during upward property market condition. It is mainly because the property developers would still bid the rural land sites at a discount even during the period of an improving property market condition. However, the result of AC - c (-871.333) during softened market condition is found to be consistent with the presumption that AC &lt; c as proposed on the Hypothesis 1. Besides, the other results from paired samples T test appears to be satisfactory with significant level (2-tailed) maintained at 0.001/0.000 and t test result all significantly over 2.